Last Chance: 3.5 Percent Down

Mortgage industry changes: Low rates and terms may soon be history

You are going to be hearing a lot about restructuring the mortgage industry in the next months and years.

But the bottom line for home buyers is buy now and get financing in place by as early as May. The great terms of recent years will soon be gone, and probably gone forever.

Experts say you will probably never again see down payments in the 5 percent range (even now becoming harder to find) or 30-year fixed rates under 5 percent.

The median down payment in nine major U.S. cities rose to 22 percent late last year. This was the highest requirement since 1997 on properties purchased through conventional mortgages, according to a Wall Street Journal report.

In many areas, however, a down payment of only 10 percent of the mortgage amount could be available for people with high credit scores.

The lowest down payments are still offered by the Federal Housing Administration, FHA. They will finance a home with a 3.5 percent down payment.

But a recent Obama Administration white paper on the mortgage industry hints that this very low down payment might change as the federal footprint in the mortgage market shrinks.

According to CNN Money, Congress will be considering raising FHA down payment requirements, approving higher insurance fees for FHA mortgages, and changing rules for ‘qualified’ mortgages.  This could mean higher interest rates for consumers and higher down payments, perhaps up to 30 percent.

With its low down payment requirements, low interest rates, and lower credit score requirements, FHA now has a 30 percent market share in the mortgage arena but plans are to reduce its activity to just 10 percent.

Administration officials say the planned process could take some time, but it might include phasing out federal backing of Fannie Mae and Freddie Mac. Since the mortgage crisis began, the government has bailed out the federally backed entities to the tune of $150 billion.

7 Things You Should NOT Do When Applying for a Home Loan

This is a list of things to steer clear of when you are seeking to obtain financing for a home. If you do any of these things, please contact your loan officer immediately.

Even if  you have been pre-qualified, we can help you re-qualify.

1. Don’t buy or lease an auto!
Lenders look carefully at your debt-to-income ratio. A large payment such as a car lease or purchase can greatly impact those ratios and prevent you from qualifying for a home loan.

2. Don’t move assets from one bank account to another!
These transfers show up as new deposits and complicate the application process, as you must then disclose and document the source of funds for each new account. The lender can verify each account as it currently exists. You can consolidate your accounts later if you need to.

3. Don’t change jobs!
A new job may involve a probation period, which must be satisfied before income from the new job can be considered for qualifying purposes.

4. Don’t buy new furniture or major appliances for your “new home”!
If the new purchases increase the amount of debt you are responsible for on a monthly basis, there is the possibility this may disqualify you from getting the loan, or cut down on the available funds you need to meet the closing costs.

5. Don’t run a credit report on yourself!
This will show as an inquiry on your lender’s credit report. Inquiries must be explained in writing.

6. Don’t attempt to consolidate bills before speaking with your lender!
The loan officer can advise you if this needs to be done.

7. Don’t pack or ship information needed for the loan application!
Important paperwork such as W-2 forms, divorce decrees, and tax returns should not be sent with your household goods. Duplicate copies take weeks to obtain, and could stall the closing date on your transaction.